Nasty Capital Gains Season is Underway

A rising stock market carries with it some hefty tax bills for mutual fund shareholders, according to a recent Morningstar article. Many active funds have been dealing with asset outflows over the past few years, forcing fund managers to “sell appreciated positions to meet investor withdrawals, and that action triggers capital gains distributions.” The article explains some of the factors to consider in the current capital gains scenario, including the following: Investors will owe taxes on distributions occurring in a taxable account unless they sell positions to capture gains. However, the article points out, “most investors don’t have a lot […]

Fund Managers: The Latest Might Not be the Greatest

The investing mantra that touts patience as the best strategy for successful investing extends to choosing, and evaluating, fund managers. Research conducted by Robert W. Baird & Co. provides evidence that even the top-performing money managers endure prolonged periods where they underperform their benchmarks and/or their peers. Further, the findings show that “shortsighted” investors who switch to new managers based on recent successes (over a period of 1 to 3 years) might “leave wealth on the table.” In fact, the report says, “virtually all of the best investment managers, based on 10-year performance, experienced three-year stretches where they underperformed their […]

Swensen on the Dangers of Mutual Funds

Yale endowment manager David Swensen has produced exceptional long-term returns over the long haul. And in a recent op-ed for The New York Times, he takes aim at some of those who haven’t been able to do that: mutual funds. “Too often, investors believe that mutual funds provide a safe haven, placing a misguided trust in brokers, advisers and fund managers,” Swensen writes. “In fact, the industry has a history of delivering inferior results to investors, and its regulators do not provide effective oversight. The companies that manage for-profit mutual funds face a fundamental conflict between producing profits for their […]